Factors That Affect Life Insurance Premiums | The 7 Main Factors that Affect Life Insurance Premium in India

Factors That Affect Life Insurance Premiums
Factors That Affect Life Insurance Premiums

Life insurance is one of the best ways that you can protect your loved ones. Whether you are an individual or a family, securing your finances should be at the top of your priority list. Apart from helping and protecting your loved ones, life insurance can also be a great investment.

If you are a financial provider and have dependents dependent on you, it is imperative that in the event of your unfortunate demise, the financial concerns of your dependents, be it family or professional, are taken care of. Life insurance is considered very important for a good financial plan.

In today’s times, life insurance is one of the best ways that you can protect your loved ones. However, it can be confusing to understand what factors can affect your insurance premiums and what aspects of your application can increase or decrease your rates.

We are here to demystify the process so that you can get a better idea of how insurance rates are determined when comparing insurance policies.

Age Of The Policy Holder

The primary factor affecting the premium of the policyholder is his age. The premium for a young person’s policy is much lower than that of an older person, mainly because a young person is less likely to contract a life-threatening disease or die at a young age.

If we look at it from an insurer’s point of view, a young person has a higher chance of continuing with a insurance policy for years to come. This makes them a lesser liability to the insurer. Hence there is a higher chance of being eligible for a lower premium.

So, as a general rule, it would be better for you to take a life insurance policy early in your career to avail the lowest premium possible.

Gender Of The Policy Holder

Another important factor that determines the amount of your policy premium is gender. In today’s new era, insurance companies are not against gender equality, but they believe that life expectancy is different for different genders. According to some studies and statistical findings, women are believed to live at least 5 years longer than men. This translates to women availing their policies for a longer period than men and means they can avail of lower life insurance premiums.

Health Of The Policy Holder

How is your health? It plays a big role in determining the policy premium. Whenever you go for a life insurance policy, you as a policyholder have to provide your health records as well. These records will ensure that you do not have any chronic diseases or potential health problems.

In some life insurance policies today, insurers require a medical examination and access to your health records before issuing the policy. Through this the insurer tries to determine the risk involved in giving you the policy.

Life Style, Habits And Hobbies

One important factor that most people do not consider while thinking about life insurance premium is your lifestyle, your habits and your hobbies.

If you are fond of smoking and drinking, it will force you to pay more. The main reason for this is that people who smoke and consume alcohol are more likely to have various diseases and their mortality rate is also high.

Do you live an adventurous lifestyle with hobbies like racing cars, scuba diving or rock climbing? If so, this is a high risk job. These high-risk hobbies can lead to higher premiums.

Obesity is another factor that affects your premium as a policyholder. Being obese can lead to many health problems like osteoarthritis, high blood pressure, cancer, stroke, coronary heart disease, which can lead to overall health problems in the future.

Medical History Of The Policy Holder

Even if you do not have an existing medical condition, an insurance provider will ask for information about your health as well as the health of your family, as it is widely known that some diseases are hereditary. Having a family history of stroke, cancer, or other serious medical conditions can make you more vulnerable to these diseases. These factors can increase the cost of your life insurance policy.

Professions And Conditions Of Employment

Another important factor that can increase your life insurance premium is your occupation. Your occupation also plays an important role in the premium you pay. Some occupations that are considered more risky than others include the mining industry, oil and gas, fishing, loggers, pilots, and roofers.

Whenever you apply for a life insurance policy, the insurers ask you about your occupation. Your premiums may be higher if your occupation is one of the above that exposes you to toxic chemicals or requires you to perform hazardous work.

Also Read – Why Should I Buy Term Life Insurance?

Types Of Insurance Plan

Lastly but most importantly, the specification of the policy you choose is another factor that affects your life insurance premium. Everyone has different needs, so not all policies are created equal. Some insure you for a specific time frame while others cover you for life. Different policies have different costs.

Policies issued for larger benefit amounts for longer periods are generally more expensive than policies with lower benefit amounts for shorter periods. Also, there is a difference between whole and term life insurance policies. Whole life insurance policies are more expensive than term life insurance policies.

What are the factors that affect the premium of your life insurance policy?

Frequently Asks Questions(FAQ’s)

Q1. Why should I buy life insurance at a young age?

The insurance premium is always based on your age so the younger the age the lower the premium for the same insurance. Also, your health condition affects the premium at a young age and you are eligible for a higher sum assured at a lower premium.

Q2. Which is better term insurance or whole life?

Term insurance and whole life insurance have their own advantages and should be bought based on your objectives. Your requirement should determine which is best for your situation.

Q3. Why do life insurance premiums increase with age?

Life insurance premiums depend on your age. As you age, your insurance premium will start increasing. This is because your risk of death increases as you get older.

The Bottom Line

Life insurance is something that many adults should have, it is a simple financial instrument that can provide protection to your loved ones who are solely dependent on you. It also gives you mental peace. If you meet with an accident, your beneficiaries will not face financial difficulties.

If you are familiar with the different types of life insurance, such as term and whole life insurance, consider consulting with a financial professional to determine which life insurance may be right for your situation and goals. A financial advisor can also help you reduce your premium cost.

Also Read – Is It Really Worth It To Buy A Term Life Insurance?

Also Read – Why should you buy a term life insurance plan now? Know about 5 reasons!

I am a Full-time Personal Finance Writer with a passion and cryptocurrency newbie! Learning about Crypto, NFTs, DeFi and GameFi with my research and writing for usfinancedeals.com

Leave a Comment